Meyers Report: 2013 Economic Forecasts

See the 2012 Results:

• Forecasts for 2012 Reviewed
• 2012 Economic Predictions Review – Part 2

This year will be tumultuous legislatively and economically. From governmental and fiscal chaos to rapid advances in the energy and petrochemical sectors, there will be conflicting indicators of pending economic doom to strong growth. In the end, it will hinge on political cooperation (which we won’t see) and entrepreneurship (which we will see). In 2013, the biggest underlying strength will be the reality that we are on our way to energy independence—and the world knows it.

1. Gasoline. Today the U.S. average for regular is $3.30/gallon. By the end of April or May, look for a price hike to $3.95/gallon.
2. Crude oil. Currently, WTI and Brent are at $93.77 and $110.57, respectively. By the end of the first half, prices should climb to $108 for WTI and $115 for Brent, possibly higher.
3. Steel sales will be a flat year and either will maintain current sales levels, or increase by no more than 3% for the year.
4. Orders for construction and agricultural vehicles/equipment will decline 10-15% or more for in the first half. Only heavy Chinese buying could reverse this trend. Current figures show the Chinese growing at a 7-8% rate, but many economists, and even Chinese officials, question the numbers.
5. Major energy processing and infrastructure projects will be up by 8-10%, possibly more, in 2013. Regardless of where the rest of the economy goes, these projects were planned, financed and committed to three to four years ago.
6. Keystone pipeline will be built as the environmental objections have been overcome and the election is over.
7. Energy processing technology will change dramatically over the next 12 to 18 months. Look for a major push to build plants that will convert natural gas to liquids, for aviation fuel, diesel and gasoline. Shell Oil will be in the forefront of the change, as they already are doing in Asia and the Middle East.
8. Precious metals. If we do not reign in our debt before the end of May, by the end of June, Gold (currently $1,667/oz.) will rise to $1,775 and Silver (currently $31/oz.) could climb to $38 to $42.
9. Dollar to fall vs. the Euro, to $1.42-$1.47, largely because of our debt problems.
10. GDP will increase 5%, slightly faster than the 4% rate of the past 3 years. While real GDP (after inflation) will increase close to 2%-3%. Unfortunately, most individuals will continue to see a decline in their living standards.
11. Inflation. The CPI will gradually move from the 2% vicinity to 3% by the end of the year.
12. Interest rates will move higher as the rate on 10-year Treasuries goes from 1.8% to 2.3% by year end. Shorter-term rates will all move higher, but not as much as longer-term rates.
13. Stock prices will rise 5%-10% higher. However, it could do better if Federal spending is contained. The DJIA, currently at 13,507 should rise to 14,200 and possibly 14,850. S&P 500, currently at 1,471, should rise to 1,550 and possibly break 1,600. NASDQ, currently at 3,117, should do a bit better and hit 3,335 and possibly 3,500.
14. Fed policy will remain highly expansive with bank loans and investments another 5% to 10% from 2012.
15. Fed Funds Rate will move closer to 0.25%, up from 0.06%.
16. Bank soundness. In banking, the great debate will be on risk management and the soundness of bank investments. If there is another bank crash, do not expect a bailout, which is why this is a hot button.
17. FDIC policy will keep the heat on bank lending and investments, but will ease on capital requirements.
18. Political-gun control. Nothing major will occur. There will be no ban on assault rifles. Instead look for tougher registration requirements, and stronger notification rules when firearms are either lost or stolen.
19. Debt ceiling. The President will threaten to issue an executive order, citing the 14th Amendment, to raising the debt ceiling. If he does, there will be calls for impeachment. Our bet, there will be a compromise where both parties survive.
20. Tax increases. There will be no more tax increases beyond what has already been done with Obamacare and the expiration of the Bush tax cuts. Anyone voting for tax increases now can expect to be gone from office with the next election.
21. Supreme Court. Look for named Jeh (pronounced Jay) Johnson to be offered the first vacancy. He is a former general counsel for the Department of Defense. Today he is a New York lawyer and described as brilliant and charismatic.
22. FTC will continue to make it tough on potential mergers.
23. NLRB will continue their extreme pro-labor rulings and activities.
24. Senate filibuster rule. Look for Elizabeth Warren to push for a change here, going back to the good old days. Back then, in order to have a filibuster, you actually had to do it rather than just declare it. Think in terms of “Mr. Smith Goes to Washington.”
25. Spending constraints will be achieved as a result of the debt negotiations. These will not have a negative impact on the economy.
26. A trillion dollar coin. There has been a proposal by Treasury to mint one, leave it on deposit with the Fed to offset some of the US debt the Fed holds. It was a serious trial balloon that got popped.